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Tech Talk for Monday May 16th 2016

 

Economic News This Week

May Empire Manufacturing Index to be released at 8:30 AM EDT on Monday is expected to slip to 6.2 from 9.6 in April

April Consumer Price Index to be released at 8:30 AM EDT on Tuesday is expected to increase 0.3% versus a gain of 0.1% in March. Excluding food and energy, April CPI is expected to increase 0.2% versus 0.1% in March.

April Housing Starts to be released at 8:30 AM EDT on Tuesday is expected to increase to 1,135,000 units from 1,089,000 units in March.

April Industrial Production to be released at 9:15 AM EDT on Tuesday is expected to increase 0.2% versus a drop of 0.6% in March. April Capacity Utilization is expected to increase to 75.0% from 74.8% in March

FOMC Meeting Minutes for the April 27th FOMC meeting are released at 2:00 AM EDT

Weekly Initial Jobless Claims to be released at 8:30 AM EDT on Thursday are expected to drop to 278,000 from 294,000 last week

May Philadelphia Fed Index to be released at 8:30 AM EDT on Thursday is expected to improve to 2.7 from -1.6 in April

April Leading Economic Indicators to be released at 10:00 AM EDT on Thursday are expected to increase 0.3% versus a gain of 0.2% in March

Cdn. April Consumer Prices to be released at 8:30 AM EDT on Friday are expected to increase 0.4% versus a gain of 0.6% in March. Excluding food and energy, April CPI is expected to be unchanged versus a gain of 0.2% in March.

Cdn. March Retail Sales to be released at 8:30 AM EDT on Friday are expected to increase 0.4% versus a decline of 0.7% in February. Excluding auto sales March Retail Sales are expected to increase 0.2% versus a decline of 0.4% in February.

April Existing Home Sales to be released at 10:00 AM EDT on Friday are expected to increase to 5.40 million units from 5.33 million units in March

 

Earnings News This Week

 

The Bottom Line

Technical deterioration last week at a time when equity markets are overbought suggests a cautious strategy for equity ownership in markets, sectors and commodities at a time when seasonal influences normally change from Positive to at least Neutral. Appropriate action is recommended for investors employing seasonal strategies that are at or near the end of their optimal period of investment.

Selected subsectors with favourable seasonality at this time of year continue to perform well and can be held for now. They include medical supplies, beverage and food/drug distribution, REITs, electric utilities and waste management.

 

Observations

Economic focus this week is on the FOMC meeting minutes to be released on Wednesday. Is the Fed leaning toward an increase in the Fed Fund rate in June?

Other economic news is expected to confirm slow but steady growth in the U.S.

First quarter reports by S&P 500 companies are starting to wind down: 91% have reported to date. 71% reported higher than consensus earnings. 53% reported higher than consensus sales. Blended earnings fell 7.1% on a year-over-year basis. Another 21 S&P 500 companies and 3 Dow Jones Industrial Average companies (Home Depot, Cisco, Wal-Mart) are scheduled to release results this week.

Investment analysts remain cautious about second quarter prospect after 58 S&P 500 companies issued negative guidance and only 25 companies issued positive guidance. Consensus for the second quarter is a 4.6% decline in earnings and a 1.3% decline in sales on a year-over-year basis.

Beyond the second quarter according to FactSet, S&P 500 companies are expected to report a year-over-year 1.4% earnings gain in the third quarter and 7.5% gain in the fourth quarter. Sales are expected to increase 1.8% in the third quarter and 4.6% in the fourth quarter.

Technical action by S&P 500 stocks last week was mixed: 26 stocks broke resistance and 18 broke support. Weakness was particularly notable in the Transportation and Retail Merchandiser sectors.

Medium term technical indicators (e.g. S&P 500 and TSX Composite Momentum Barometer) continue to trend down from intermediate overbought levels.

Short term momentum indicators for many equity markets and sectors turned lower on Friday.

Seasonal influences for many equity markets and sectors have a history of changing to Neutral from Positive at this time of year.

U.S. equity index trends during a U.S. Presidential election year are following the historic pattern: Weakness by the Dow Jones Industrial Average from mid-April to late May frequently occurs followed by a recovery into June.

 

Equity Indices and Related ETFs

Short term momentum indicators for many equity markets turned down on Friday.

Daily Seasonal/Technical Equity Trends for May 13th 2016

 

Green: Increase from previous day

Red: Decrease from previous day

 

Calculating Technical Scores

Technical scores are calculated as follows:

Intermediate Uptrend based on at least 20 trading days: Score 2

Higher highs and higher lows

Intermediate Neutral trend: Score 0

Not up or down

Intermediate Downtrend: Score -2

Lower highs and lower lows

 

Outperformance relative to the S&P 500 Index: Score: 2

Neutral Performance relative to the S&P 500 Index: 0

Underperformance relative to the S&P 500 Index: Score –2

 

Above 20 day moving average: Score 1

At 20 day moving average: Score: 0

Below 20 day moving average: –1

 

Up trending momentum indicators (Daily Stochastics, RSI and MACD): 1

Mixed momentum indicators: 0

Down trending momentum indicators: –1

 

Technical scores range from -6 to +6. Technical buy signals based on the above guidelines start when a security advances to at least 0.0, but preferably 2.0 or higher. Technical sell/short signals start when a security descends to 0, but preferably -2.0 or lower.

 

Long positions require maintaining a technical score of -2.0 or higher. Conversely, a short position requires maintaining a technical score of +2.0 or lower.

 

The S&P 500 Index slipped 10.53 points (0.51%) last week with more than all of the decline occurring on Friday. Intermediate trend remains up. Short term momentum indicators turned down on Friday. The Index remained below is 20 day moving average.

Percent of S&P 500 stocks trading above their 50 day moving average (Also known as the S&P 500 Momentum Barometer) plunged last week to 51.80% from 63.00%. Percent remains intermediate overbought and trending down.

Percent of S&P 500 stocks trading above their 200 day moving average dropped last week to 64.00% from 66.60%. Percent remains intermediate overbought and trending down.

Bullish Percent Index for S&P 500 stocks fell last week to 71.00% from 71.60% and remained below its 20 day moving average. Percent remains intermediate overbought and trending down.

Bullish Percent Index for TSX stocks slipped last week to 73.22% from 74.48%, but remained above its 20 day moving average. The Index remains intermediate overbought and shows signs of rolling over.

The TSX Composite Index added 47.11 points (0.34%) last week. Intermediate trend remains up (Score: 2). Strength relative to the S&P 500 Index changed to Neutral from Positive (Score: 0). The Index dropped below its 20 day moving average on Friday (Score: -1). Short term momentum indicators are trending up (Score: 1). Technical score last week remained at 2.

Percent of TSX stocks trading above their 50 day moving average (Also known as the TSX Composite Momentum Barometer) increased last week to 64.96% from 63.52%. Percent remains intermediate overbought and trending down.

Percent of TSX stocks trading above their 200 day moving average increased last week to 69.23% from 65.67%. Percent remains intermediate overbought.

The Dow Jones Industrial Average dropped 205.31 points (1.16%) last week. Intermediate trend remained up. Note that short term trend changed to down when the Average broke below 17,580.38 to complete a head and shoulders pattern and a downside target of 17,000. Strength relative to the S&P 500 Index changed to Negative from Positive. The Average remained below its 20 day moving average. Short term momentum indicators returned to down from up on Friday.

Bullish Percent Index for Dow Jones Industrial Average stocks slipped last week to 86.67% from 90.00% and remained below its 20 day moving average. The Index remains intermediate overbought and rolling over.

Bullish Percent Index for NASDAQ Composite stocks dropped last week to 49.63% from 50.63% and remained below its 20 day moving average. The Index remains in an intermediate downtrend.

The NASDAQ Composite Index slipped 18.47 points (0.39%) last week. Intermediate trend remains Neutral. Strength relative to the S&P 500 Index remains Negative. The Index remained below its 20 day moving average. Short term momentum indicators returned to down on Friday.

The Russell 2000 Index dropped 12.28 points (1.10%) last week. Intermediate trend remains neutral. Strength relative to the S&P 500 Index changed to Negative from Neutral. The Index remains below its 20 day moving average. Short term momentum indicators returned to down on Friday.

The Dow Jones Transportation Average lost 231.65 points (3.00%) last week. Intermediate trend remained neutral. Strength relative to the S&P 500 Index remains negative. The Average remained below its 20 day moving average. Short term momentum indicators returned to down on Friday. Technical score remained at -4 last week.

The Australia All Ordinaries Composite Index added 37.70 points (0.70%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Positive. The Index remained above its 20 day moving average. Short term momentum indicators remained mixed. Technical score remained last week at 5.

The Nikkei Average added 305.49 points (1.90%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Neutral. The Average remained below its 20 day moving average. Short term momentum indicators improved to mixed. Technical score improved last week to 1 from 0.

Europe iShares dropped $0.39 (1.00%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Negative from Neutral. Units remain below their 20 day moving average. Short term momentum indicators are mixed. Technical score slipped last week to -1 from 0.

The Shanghai Composite Index dropped 86.14 points (2.96%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Negative from Neutral. The Index remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score slipped last week to -2 from 0.

Emerging Market iShares dropped $0.56 (1.71%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Negative. Units remained below their 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at -2.

 

Currencies

The U.S. Dollar Index added 0.74 (0.79%) last week. Intermediate trend remains down. The Index moved above its 20 day moving average. Short term momentum indicators are trending up.

The Euro dropped 0.96 (0.84%) last week. Intermediate trend remains up. The Euro dropped below its 20 day moving average on Friday. Short term momentum indicators are trending down.

The Canadian Dollar slipped US 0.19 cents (0.23%) last week. Intermediate trend remains up. The Canuck Buck remained below its 20 day moving average. Short term momentum indicators are trending down.

The Japanese Yen dropped 1.30 (1.39%) last week. Intermediate trend remains up. The Yen remained above its 20 day moving average. Short term momentum indicators are trending down.

 

Commodities

Daily Seasonal/Technical Commodities Trends for May 13th 2016

 

Green: Increase from previous day

Red: Decrease from previous day

 

The CRB Index added 2.64 points (1.47%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Positive. The Index remained above its 20 day moving average. Short term momentum indicators are trending down. Technical score remained at 4

Gasoline added $0.10 per gallon (6.67%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Positive from Neutral. Gas moved back above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased last week to 6 from 0

Crude Oil gained $2.37 per barrel (5.31%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Positive. Crude remained above its 20 day moving average. Short term momentum indicators are trending up. Technical score improved last week to 6 from 4.

Natural Gas slipped $0.01 per MBtu (0.48%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Positive. “Natty” dropped below its 20 day moving average on Friday. Short term momentum indicators are mixed. Technical score remained at 3 last week.

The S&P Energy Index slipped 2.44 points (0.50%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index slipped to Neutral from Positive. The Index remained below its 20 day moving average. Short term momentum indicators are mixed. Technical score slipped to 1 from 2.

The Philadelphia Oil Services Index dropped 10.76 points (6.37%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index turned Negative on Friday. The Index remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -2 from 2.

Gold dropped $19.70 per ounce (1.52%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Positive. Gold remained above its 20 day moving average. Short term momentum indicators are trending down. Technical score improved last week to 4 from 2.

Silver dropped $0.40 per ounce (2.28%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Neutral from Positive. Silver dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score slipped last week to 0 from 4. Strength relative to Gold has turned Neutral.

The AMEX Gold Bug Index dropped 4.66 points (2.06%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remains Positive. The Index remains above its 20 day moving average. Short term momentum indicators are trending down. Technical score remained last week at 4.

Platinum dropped $31.10 per ounce (2.87%) last week. Intermediate trend remains up. Relative strength: Positive. Trades above its 20 day MA. Momentum is trending lower. Score: 4

Palladium dropped $14.10 per ounce (2.32%) last week. Intermediate trend remains up. Strength relative to the S&P 500 changed to Neutral. PALL dropped below its 20 day moving average. Short term momentum is trending down. Technical score dropped to 0 from 4

Copper dropped 0.076 per lb (3.55%) last week. Intermediate trend changed to Down from Neutral on a move below $2.067 per lb. Strength relative to the S&P 500 Index changed to Negative from Neutral. Copper remained below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to -6 from -2

The S&P Metals & Mining Index dropped 36.71 points (6.93%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index changed to Neutral from Positive. The Index dropped below its 20 day moving average. Short term momentum indicators are trending down. Technical score dropped last week to 0 from 4

Lumber added $15.80 (5.20%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Positive. Lumber remains above its 20 day MA. Momentum: Up.

The Grain ETN added $1.05 (3.25%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Positive. Units recovered above its 20 day moving average. Short term momentum indicators are trending up. Technical score increased to 6 from 2

The Agriculture ETF added $0.25 (0.53%) last week. Intermediate trend remains up. Strength relative to the S&P 500 Index remained Positive. Units remained below their 20 day moving average. Short term momentum indicators are mixed. Technical score improved last week to 3 from 2.

 

Interest Rates

Yield on 10 year Treasuries dropped 7.4 basis points (4.16%) last week. Intermediate trend remains down. Yield remains below its 20 day moving average. Short term momentum indicators are trending down.

Conversely, price of the long term Treasury ETF added $1.83 (1.40%) last week. Intermediate trend remains up. Price remained above its 20 day moving average.

 

Volatility

The VIX Index added 0.33 (2.24%) last week. Intermediate trend remains down. The Index remained above its 20 day moving average.

 

Sectors

Daily Seasonal/Technical Sector Trends for March May 13th 2016

 

Green: Increase from previous day

Red: Decrease from previous day

 

Special Free Services available through www.equityclock.com

Equityclock.com is offering free access to a data base showing seasonal studies on individual stocks and sectors. The data base holds seasonality studies on over 1000 big and moderate cap securities and indices. To login, simply go to http://www.equityclock.com/charts/ Following is an example:

 

StockTwits Released on Friday @EquityClock

Technical action by S&P 500 stocks to 10:00: Mixed. Breakouts: $NVDA, $NI. Breakdowns $HOT, $SPG, $MAC

Editor’s Note: After 10:15, technical action by S&P 500 stocks turned bearish. Breakout: GIS. Breakdowns: AET, DLPH, DLTR, JBHT, APD

Notable breaks of support send a warning signal to the broad equity market.

Editor’s Note: The Dow Jones Industrial Average completed a short term head and shoulders pattern in late trading on Friday. The S&P 500 Index will complete a short term head and shoulders pattern on a move below 2039.45

 

Disclaimer: Seasonality and technical ratings offered in this report by www.timingthemarket.ca and www.equityclock.com are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed